GOLD RUSH

In July 2018, Felix Gabrielyan was appointed Minister of Nature Protection and Natural Resources for the unrecognised Republic of Artsakh.309 There was no official indication as to what his predecessor, Vazgen Mikaelyan, a former mayor of Stepanakert, did to deserve losing his seat in Cabinet.

The joke we heard one evening from a group of young, angry, environmental activists in the local Bardak Pub is that Mikaelyan was informed that he was free to take anything he wanted aside from the ministry’s Big Rubber Stamp, as he cleared out his office on Petrvari Ksani Street.

Gabrielyan would certainly be in need of the official Big Rubber Stamp. The job of the minister is to wield it well and endorse the mining and logging permits he is instructed to issue by his bosses, in both Stepanakert and Yerevan.

His boss Bako Sahakyan, presumably, also has a Big Rubber Stamp on his desk, because, although his election success was based upon promises of anti- corruption and transparency, nothing much actually changed.

In fact, Sahakyan was probably always on the slippery slope towards moral oblivion. Whether in order to grease the system in Stepanakert, to enrich himself and his power circle, or to maintain his ties with his patrons in Yerevan, it did not matter. He increasingly took on a leadership template used by his predecessors. Appointing family members to powerful jobs they were not qualified to hold.

Sidelining officials who ask too many questions. Entangling private business with his political role to such a degree that he literally profits from his time in Nagorno-Karabakh’s top post.

While we were in the town, there were rumblings of discontent, comparisons being drawn between Sahakyan and Zimbabwe’s erstwhile leader Robert Mugabe. An official in the headquarters of Artsakhbank, adjacent to Sahakyan’s office, who introduced himself only as Mr. Aboutiounian stated: “They project the whole Artsakh thing as a nationalistic cause, pull in millions of dollars of cash from Armenian diaspora across the world but, when it comes down to it, use the state as a personal fiefdom, raping us financially and viewing power simply as a vehicle for dispensing favours to members of their own families.

“The biggest accounts here are all politicians and their families.”

Across the road from Artsakhbank is the National Assembly of the Republic of Artsakh. Mr. Aboutiounian tells us that members of this illustrious body regularly scurry across the square to deposit unseemly lump sums of cash... American dollars, Armenian drams and Russian rubles.

He smiles sarcastically and lets his statement hang in the air. “Where from?”

A succession of leaders in Stepanakert had shown an almost monarchical instinct, a distinct neopatrimonialism where the chief executive maintains authority through personal patronage rather than through ideology or law. Neopatrimonialistic leaders rise or fall based on their ability to plunder their own country, to staff government with loyal operatives and to, literally, buy off groups that might otherwise mount a challenge to their rule.

Sahakyan’s task was always to balance his own needs with those of Robert Kocharyan, Serzh Sargsyan and their respective circles. No wonder he looks so tired.

The end goal of all of this is to allow the individual and his favoured few to live as well and securely as possible. A culture of systemic graft has become inherent to governance in the territory.

“There is nobody to stop our leaders from doing these kinds of things.

Our former Presidents from Yerevan continue to be involved. This has become normal routine. Governance here has become badly distorted,” adds Mr. Aboutiounian, with a sad shrug of his shoulders. “But we live in a country where only the poor get arrested. Corruption has become ingrained in the system. Millionaire politicians don’t get thrown into prison here.”

One of the many issues with neopatrimonialism is that it breeds mismanagement. Now Prime Minister of Armenia, in his previous incarnation as opposition man-of-the-people, Nikol Pashinyan was outspoken in highlighting that a government, cabinet and national hierarchy staffed with cronies, and an economy based upon economic favours granted to companies willing to pay kick backs, is a recipe for widespread malaise.310 Unravelling the system will be harder done than said.

As Sahakyan learned, acquiescence to this structure is often the only way to stay in office.

On April 12th, 1204, after a series of catastrophic military defeats to the Roman armies, the Crusaders of the Fourth Crusade entered Constantinople. What ensued was arguably one of the most overwhelming examples of plundering the world has ever witnessed.311 The invaders had heard of the city’s splendour. It was said that two-thirds of the world’s riches were inside.

For more than three days they burned, destroyed, looted, raped, desecrated and vandalised. The devastation in Constantinople would be enough for historians to recognise this devastating pillage as a great crime against civilisation and history.

Beyond simple mayhem, the Crusaders did find the wealth they were seeking. Huge amounts of gold and silver, armour, gold-plated utensils, precious stones, silk and satin garments and furs were looted. The art masterpieces of the age, accumulated in Constantinople, were destroyed and any precious metals sent to the foundry.

Led by Pope Innocent III, the Crusaders of the Fourth Crusade took apart the capital city of the Roman-Byzantine Empire and made off with its riches. Perhaps there is still no precedent in modern history.312

It would be difficult to compare the dramatic fall of Constantinople with the Nagorno-Karabakh War. At its zenith the former was arguably the planet’s capstone, the cultural, economic and intellectual capital of the world. To most observers Stepanakert was little more than the largest village in a windswept mountainous region, where cows outnumbered people.

Or was it? Nagorno-Karabakh did not have the great cultural icons, the vast palaces, or the richly decorated religious sites. But, among the fully initiated, there was an understanding that the remote territory did have great wealth. In particular, indication of this can be drawn from the work of one Soviet geologist, Arsen Tsaturov.

In 1945, Tsaturov participated in the exploration of the mountains of Geghama and Mrav and discovered new evidence of mineral deposits. Tsaturov continued to study the area and his reports indicated upwards of 500 tonnes of gold and 2,700 tonnes of silver in the Kelbajar, Lachin and Qubadli regions. He reported on vast copper deposits which he estimated at around 875,000 tonnes in Kelbajar, 450,000 tonnes in Qubadli and some 300,000 tonnes in Lachin.

From the upper reaches of the River Tartar he reported on 150,000 tonnes of cobalt, while he discovered deposits of some 2 million tonnes of chrome.313

At prevailing market prices in 2018 these have a combined value of some $43 billion, and beyond this he provided geological evidence of lithium and beryllium and other important elements, along with barite, pyrite and aluminium.

Let me repeat that figure – $43 billion.314

Tsaturov was a pioneer, though one using methodologies and technologies that have been far surpassed in more contemporary times.

Prior to the Nagorno-Karabakh War — after which information on the territory’s natural resources became more of a state secret instead of a matter of public information — these figures had continued to grow. Using pre-1991 data and what limited contemporary information there is, it is possible to add to Tsaturov’s statistics: Kelbajar, Lachin, Qubadli and Zangilan were believed to hold confirmed deposits of 1,250 tonnes of gold, 4,550 tonnes of silver, 1,840 tonnes of copper, 660,000 tonnes of lead, 775,000 tonnes of zinc, 150,000 tonnes of cobalt and 2.25 million tonnes of chrome. Beyond this metallurgists pointed to some 120 million tonnes of aluminium ore and iron ore.315

Given the pall of secrecy surrounding discovery and exploitation of natural resources of Nagorno-Karabakh, even based upon these estimates it could be conservative to state that at prevailing 2018 market prices the territory’s natural assets have a value of some $113 billion.316

Not included in that figure are semi-precious stones in general, mines of precious and base metals elsewhere, along with copper and molybdenum mines in Qubadli and Zangilan, unknown copper, zinc and lead deposits west of Hadrut (Hojavend) plus gold and silver discoveries made along the River Khachen (River Hachinchay). The territory is also believed to possess commercial deposits of uranium.317

Based on these conservative estimates and figures, Nagorno-Karabakh would seem to possess all the lustre of Constantinople some nine centuries ago.

And, indeed, exploitation would begin post-haste. In February 1995, the National Academy of Sciences of Armenia opened a geology laboratory in these occupied territories, tasked along with the Institute of Geological Sciences of Armenia318 to map the natural resources of Nagorno-Karabakh and make recommendations on their exploitation.

By 2013, Armenian environmental NGO EcoLur Informational reported that across the territory there are 15 mines engaged in metallics, and a further 51 involved in non-metallics, such as construction materials like limestone.319EcoLur Informational highlighted the most recent valuable discovery as being the Kashen copper mine, operated by Base Metals and able to annually process up to 1,600,000 tonnes of ore.320

Since then other major developments had come on line, headlined by Kashen, in Nagorno-Karabakh’s northern Martakert (Agdere) district.

In 2016, Armenian-owned, Liechtenstein-registered Vallex Group opened a giant copper and molybdenum ore processing plant in Nagorno-Karabakh. It represented the biggest business project implemented in the territory in more than a decade and would serve open-pit mining operations in the northern Nagorno- Karabakh, which was estimated to contain 275,000 metric tonnes of copper and 3,200 tonnes of molybdenum.321

Registration in Liechtenstein is significant. Not so famed for its connections to the mining industry, but certainly better known as a haven of banking secrecy and corporate ownership laws that provide comfort to those who wish these things to remain opaque.322

Perhaps the most famous mine in Nagorno-Karabakh, though, is Zod.

It is often difficult to travel through the Kelbajar area freely, certainly off the main roads. Some areas are essentially a restricted military zone. This is a strategic necessity of course. Many areas have their army garrisons, viewed as a deterrent to Azerbaijan.

Yet Kelbajar has more than military strategic value. It is a potential economic target, not so much for Nagorno-Karabakh and its people, but certainly for Robert Kocharyan, Serzh Sargsyan and their web of cohorts.

Securing this as a profit centre for the former Armenian Presidents, safeguarding it from Azerbaijani intervention, and also the scrutiny of unwanted foreigners, is the job of the Artsakh Defense Army. Several hundred conscripts guard the area.

Obtaining a permit to travel into Kelbajar can be somewhat trying. Officially there is no problem with passing through, but turning off the main road leads to questions being asked. It is perhaps understandable, even if you pass yourself off for a humble tourist looking to get off-the-grid, as there is simply nothing there. Apart from the mine.

We are in luck, however. Two $100 bills, neatly tucked discreetly inside my passport, was enough to prompt a helpful colonel in the Artsakh Republic Defense Army headquarters on February Street in Stepanakert to help expedite the process.

Armed with travel papers, a day later we set off along roads that became increasingly rough, twisting up and down the sides of hills amid the picturesque countryside. The M11 road leaves Armenia and takes off into the mountains in the direction of Stepanakert, via the strategic point of the Zod mountain pass, which connects Southern and Eastern Caucasia. In this area the road is not really designed to facilitate pleasure trips. That is the way those who control the region like it.

It is all about business.

The site has a long history. There is much evidence of ancient mining: pits and funnels covered by grass, under-earth workings, the remnants of wooden mining devices, stone mortars and slags and pits. The site was active during the Bronze and Iron Ages, stretching back to the 2nd millennium BC and continuing on and off until the 14th century AD.323 In Soviet times Zod was broadly exploited for the first time. Yet it was only after contemporary independence that the mine was industrialised on its present scale.

Stopping for chai in a small roadside town near Dadivank, through our translator we speak to some of the locals, who warn that the Zod mine should not be observed too closely. They know why.

Over a pastry, the story emerges of an industrial dispute between the former operators and their Indian management. When an unsecured slag heap collapsed, entombing three men, the company’s dismissive handling of the issue led to industrial unrest and the threat of a walk-out.

Only then did Yerevan get involved. Instead of backing miners at the site when they highlighted a wholesale lack of safety, the message was clear. This belongs to Kocharyan. Get back to work.

The mine was operated until a decade ago by a firm named Vedanta Resources, a London Stock Exchange-listed, globally diversified natural resources company with interests in zinc, lead, silver, copper, iron ore, aluminium and oil and gas. Vedanta Resources boasts on its website that: At the broadest level, we do this by directly and indirectly employing over 67,000 people, with the majority drawn from the surrounding communities of each of our operations. This is in addition to our contribution to the countries we operate in through the timely payments of our tax obligations. We contributed US$ 6.2 billion to our host governments through direct and indirect taxes and royalties. In addition we have spent US$ 17.63 million in community investments.324

The company is led by executive chairman Anil Agarwal, who founded the firm in 1976 and has led it into controversy and conflict with local populations in many places where it operates. He boasts in his executive profile that: Vedanta has grown from an Indian domestic miner into a global natural resources group with entities listed in a number of markets and a world-class portfolio at large.325 For good measure the firm tells itself: The Board of Vedanta Resources plc. believes that high standards of corporate governance are critical for any business to succeed and feels deeply accountable to the shareholders for upholding this principle.326

A smiling Anil Agarwal beams out from his company website. Indeed, he has done well for himself. And his shareholders. Be damned with international law. Or whose pockets he has been lining.

His self-satisfied grin betrays a willingness to get rich quickly at the expense of anyone, or anything, that gets in the way of turning a profit. High standards of corporate governance would be laughable if it was not so tragic. Tragic for the hapless workers who were employed by Agarwal and Vedanta Resources.

In the nearby town of Mets Masrik, on the Armenian side of the border, they speak of locals being employed without being given safety helmets and the most basic equipment. Safety training was non-existent.

The mine has claimed its share of victims through what they described as something akin to Victorian-era like conditions. The locals knew the dangers, of course, but jobs are not exactly easy to come by in this poor and remote region.

This was not why Vedanta Resources’ contract was terminated, however. An appalling safety record and the litany of men that Zod claimed, and dozens maimed, was not particularly an issue.

Instead the problem was money. Anil Agarwal’s managers fought with the representatives of its primary local partner, Kocharyan.

The old saying goes that there is honour among thieves. Maybe not. Kocharyan, using Vedanta Resources to asset strip gold from an illegally-held territory, was squeezing the mining firm for a greater share of the profits.

While auditing their operations, his people discovered what they believed were serious discrepancies in what the mine was producing and what they were being told.

The outrage of the Kocharyan organisation came with not a little irony. Under- reporting, to save on the bother of paying taxes, was exactly what they were doing to the Armenian people.

As for Vedanta Resources – which was quite happy to operate the mine in defiance of international law, not least four United Nations resolutions on the return of Nagorno-Karabakh to Azerbaijan327, and was blamed for a string of deaths and life-changing injuries due to egregious safety standards – they took umbrage at the suggestion that it was anything less than transparent.

They left. The ownership and management of Zod now became even more suspect.

In 2008 came a new face, GeoProMining. Bloomberg lists this Cyprus- headquartered firm as being under the leadership of chief executive officer and director Roman N. Khudoliy.328

Zod sits astride the Armenian-Nagorno-Karabakh border. Legally speaking therefore it is a shared asset between Armenia and Azerbaijan, which should split revenues. In practice it is not even shared between Armenia and the rump administration in Stepanakert.

In fact, it is barely shared with the Armenian people either.

Zod is managed officially by GeoProMining Gold LLC (GPM Gold). In Yerevan, on paper the Ministry of Energy Infrastructures and Natural Resources lists the main shareholder as one Siman Povarenkin,329 a Russian entrepreneur. Povarenkin is an interesting character in his own right, including being linked to controversial British Brexit campaigner and Leave.EU donor Arron Banks.330 Also, in the wake of the poisoning of Sergei and Yulia Skripal in Britain, his “tier one” visa has been under review, according to The Guardian.331

As for his mining firm, GeoProMining Gold LLC (GPM Gold) is also somewhat shady. GPM Gold’s actual ownership is wrapped up in a complex network designed to obscure our view. Armenia’s Corporate Registry listed GPM Gold as owned by Dutch registered Dieze BV, which maintains offices in those well-known mining hotspots of Cyprus and the British Virgin Islands, in addition to Russia. In Cyprus, for example, at one point 16% of the shares were allocated to a pair of Cypriot companies – Belmarsh Solutions and Gosforth Enterprises – and its ownership is spun out even further to Luxembourg.332

Why the secrecy? The Panama Papers scandal put obscure company ownership and anonymous business entities back in the spotlight. Yet from Zod, GPM Gold’s corporate structure snakes out across the world, creating limited liability in multiple jurisdictions, designed to avoid taxation and, most importantly, obfuscate on the issue of ownership.

A web of offshore firms attempts to hide the truth of what is an accepted fact among the communities that skirt the facility. In the little Nagorno-Karabakh town of Kanlikend, which provides almost a dozen men to the mine, there is a quiet acceptance of their fate, although laced with not a little bitterness as to their hopeless situation.

There are no other worthwhile jobs in the area. Working at Zod pays dreadful wages. Yet there is simply no other option. One of those who makes the daily trip to the mine is Gosdan, one of some 600 men who work at Zod. As a final insult, he informs me, Armenians who are employed at Zod receive higher salaries than those from the Nagorno-Karabakh side.

A big bear of a man with the biceps that illustrates his physical efforts in the mine, Gosdan spits on the floor to underline his disrespect and growls that the people of the region live in hopelessness, while they are forced to dig out gold that disappears “to Yerevan”.

Dusty and unkempt, Kanlikend shows all evidence of the malign neglect that hangs over the whole region around gold rich Zod.

In 2012, Zod invested in a new mining fleet and stripping of the existing pit. Extraction has become more efficient.333

On the day we stand on a ridge overlooking Zod, it looks a sleepy operation. The clatter of trucks in the distance is the only thing that we hear over the wind. Hundreds of trucks moving millions of tonnes of rubble, useless surface soil that covers ore-rich earth. Together they have formed into brand new mountains that dwarf even the real ones.

A long train, dozens of vehicles long, awaits below, ready to be filled with ore-rich earth. This will head across the Lake Sevan valley and, ultimately, arrive at GeoPro’s Ararat gold recovery plant, south of Yerevan. This facility is believed to have a throughput of one million tonnes per annum and has been subject of an investment programme, a new Albion processing plant increasing the extraction coefficient for sulphide-heavy ores from Zod.334 Recovery has rocketed from 20% to over 95%.335

Ultimately, how much gold is coming out of Zod? No one is entirely sure.

No reports appear on the company’s website. Where does the extracted gold go from the Ararat gold recovery plant? Again, no one is entirely sure.

Gosdan and others we spoke to who work at the site tell of regularly seeing nuggets as large as a thumbnail. What is known is that lode deposits are considered high end for the industry, while gold grams per tonne of earth extracted is also positive.

Despite the secrecy that surrounds GeoProMining Gold LLC (GPM Gold)’s operations, it is clear that the operation’s gold production must certainly be in nine figures each year.

None of this filters down to the economically spasticised region that surrounds Zod, on either the Armenian or Nagorno-Karabakh side. Very little revenue finds its way to the Ministry of Finance on Melik Adamyan Street in Yerevan. According to one news report that appeared on Aysor.am, the company has paid just $177 million in taxes and funded $8 million in social projects.

There is no information on fees going to Stepanakert.

As the mine sits on Nagorno-Karabakh territory, the payment of tax revenues, however limited, to Yerevan is a strange anomaly.

As we would later see, however, under-reporting at the Ararat gold recovery plant – indeed across the entire industry – would see Nagorno-Karabakh gold slipped quietly to a third country.

While this process was underway, the mining industry’s godfathers, Kocharyan and Sargsyan, keep their many ill-gotten assets close to their chests. Yet they are generous in sharing some of this golden windfall with friends and family.

In Kocharyan’s case, his wife, the matronly Bella Kocharyan, is often photographed wearing high-end pieces.

On the day that we visited Kanlikend, one thing brightens Gosdan’s mood. We are joined by his friend Lernig. He lost several fingers in an accident at Zod several years ago, but still works there. Through my interpreter I learn that these grizzled miners are chuckling at events a few weeks ago, in Yerevan, when Kocharyan became the first former head of state of an ex-Soviet republic to be jailed.336 He was charged with “overthrowing Armenia’s constitutional order”. No mention of amassing an illicit multibillion dollar fortune. Or spiriting vast amounts of gold out of the country.

The former President was soon released, of course. Cleverly Article 140 of the Armenian constitution represents a veritable ‘Get Out of Jail Free’ card, stating that: ‘During the term of his or her powers and thereafter, the President of the Republic may not be prosecuted and subjected to liability for actions deriving from his or her status.’337

Basically, this allows for a President to do as he pleases.

Gosdan and Lernig joke that they are hopeful that in the days before he was released from incarceration, Kocharyan was sodomised by fellow prisoners.